Maine Owl

Oil price inflation near 100% level, barrel price headed for $200





A few years ago I used to post more on oil and oil prices. That was a time just after the Iraq invasion when a barrel cost less than $50 and very few people understood or had ever heard of "peak oil."

Despite the recent shocking run-up, few truly understand it today. The misconception is that volume of oil in the ground is the proper measure of oil supply adequacy. Nope. If you hear that there is lots of oil still left in the ground, that is true. But it is the global rate oil is able to be withdrawn for use that has hit a brick ceiling of about 85 million barrels per day, give or take a million, three years running now.

Witness the pathetic groveling of President Bush at the feet of the Saudi dictators last week. It's an interesting story of utter failure (a "snub" in the story at this link), but this time perhaps not the immediate fault of President Bush. In fact, I think Bush may be doing the right thing in the interest of relieving the immediate crisis. Trust me, I'll be pulling for him if his actions relieve some the cost burden. But in the long run, he is pathetic. Oil resources Saudi or otherwise simply cannot be marshaled for limitless increase in production of American gasoline and heating oil.

The Saudis do possibly have some extra capacity, but you have to read the buried lead in this USA Today story to get the real picture, "Saudi leaders said that there was inadequate refining capacity worldwide to process Saudi crude oil, which is heavy and difficult to turn into gas."

So the rub is that while Saudi may have some extra oil, it's not the kind the world wants for making gasoline. The subtext here is that even the Saudis are at full capacity in production of the most desirable crude grades.

Meanwhile, Bush is very tentative in reporting to the American people about the oil situation, aiming his remarks at providing good PR for the Saudis to the U.S. Christian audience Saturday (May 17) in his radio address:

PRESIDENT BUSH: On Friday we visited another of America's friends in the Middle East -- Saudi Arabia. I had a series of productive meetings with King Abdullah at his farm. We celebrated the 75th anniversary of diplomatic relations between the United States and Saudi Arabia. We reaffirmed our shared objectives of peace in the Holy Land, a secure and united Iraq and a sovereign, independent Lebanon that is free of outside interference. We talked about oil production and gasoline prices. We discussed the King's efforts to diversify his nation's economy, and the importance of political reform. And I thanked him for Saudi Arabia's strong commitment to fighting terror.

It's almost as if he thinks we can't handle/don't want to hear the truth about oil depletion. A day later in Egypt, the president had a more provocative message for a gathering of diplomats, where he makes a clear statement that oil "is limited" and will lead to economic trouble:

PRESIDENT BUSH: This is also a time to prepare for the economic changes ahead. Rising price of oil has brought great wealth to some in this region, but the supply of oil is limited, and nations like mine are aggressively developing alternatives to oil. Over time, as the world becomes less dependent on oil, nations in the Middle East will have to build more diverse and more dynamic economies.

Everyone knows that the second Bush term is an incredible disaster. He has no credibility left and faces massive hostility even when he wants to deal in diplomatic reality and operate on a genuine problem-solving basis. His penchant for force and war and the resentment that causes dominates the scene. If Bush's wars are in fact oil wars, they will in the long run achieve exactly the opposite if the strategic goal was to secure the Middle East fields.